What are Halal loans?

Halal loans are loans provided by banks that work according to Islamic rules Sharih. These rules, called Fiqh al-Muamalat, are based on Islamic transactions and support the principles of the Islamic economy. Relatively few Islamic banks began to provide alternative financial and banking products at the end of the 20th century. For customers and commercial halal companies that want to operate in Islamic influences, Halal loans provide a way around conventional, interest loans. The word itself is translated to increase, add, or excess . According to Sharia principles, interest is considered to be compensating for excess without proper consideration. RIBA can be defined in classic Islamic discourse as Excess value without a counterpart . It may also be roughly translated because the numeric value was irrelevant and to ensure equivalence in the actual value.

Sharia does not allow to receive or pay interest on loans, so Halal loans were created as an alternative. They work in different ways - for example, when the buyer approaches the bank for a loan for money to buy a specific item, the bank can buy it directly from the seller. The bank sells the item to the buyer under strict conditions, including the established collateral. While the bank sells it to the buyer for profit, it is not explicit and no fines are imposed for late payments. From the very beginning, the item is registered under the name of the buyer and it can be a feature or goods.

This type of transaction for further sales of payments is called Murabaha according to Islamic principles. The bank sells the property to the buyer for a fixed, open price in the installments of friendly customers. Price factors bring to profit and administrative. Halal loans allow customers to obtain assets without having to decide on traditional interest loans.

ijarah is another shelterUP, which is basically a type of transaction for rent. The bank first acquires assets or goods and the customer rents it until he can repay the entire amount for a period of time. Halal loans that work in Ijarah format can use a contract that allows the buyer to obtain a property for a fixed period of time. Alternatively, they may take the form of basic rental agreements.

There is also an access to common enterprises called Musharakah, , which is translated as sharing . The basic principle includes lending money to businesses and both entities are responsible for the value of the investment. The profit is achieved by selling bets later and both parties agree in advance to lose or share any profit. Banks can also issue interest rates based on the return level for this company. In this practice, the bank may suffer loss in accordance with Islamic law, which declares that it is unfair, that the creditor benefits extremely and leaves only a small part of the debtor.

Mudaraba contract is another version of Halal, in which the investment is provided by a risk capitalist or financial expert. The entrepreneur provides work and both parties share any profit or loss. If the investment is unsuccessful, the bank does not charge the fee for handling. It only charges a fee if a profit is achieved.